Carl: Miracles can and do happen, but I will not hold out. Here is my reasoning, they have pretty close to $10/share debt (and they will have more by next quarter), their assets are worth absolutely zilch, they show about $1.5/share net equity, but also about $3/share of "intangible assets". This is before taking, what I expect to be a massive write off on inventories and possibly some receivables.
I do not know what their break even should be, currently, they gross margins are a pitance, 18%, I have no idea how much of this was due to the leftover from the transition and how much of this is intrinsic high costs and inefficiencies in the Wales operation (six months ago, I told the thread about my experience with another Wales outfit), but let say they end up with 35% gross margins, then at $ 30 MM they still need to get their SG&A and R&D down to $7.5 MM to break even, this is half the current rate and a tall order. Go and calculate what sales rate and margins they will need to pay off their debts and you can see why I would prefer a smaller VECO or even smaller MASK any day on TRKN.
If they do not stop the bleeding right now, and they do not have much time to lose, they are doomed. They may be acquired, but just to pay off the creditors, the share holders will have nothing left.
I am staying aside and will wait to see some major adaptation of their technology before I consider wetting my toes on this one. If you like playing with fire, you can go for a dead cat bounce, but you got to be nimble.
Zeev
PS> I just checked DS latest report, and their gross margins are essentially the same as the same quarter last year (49.5 to 48.7 last year) I doubt that TRKN equipment had anything to do with their success. They had increased sales by 20% with good control of their costs. |
